Masazumi Wakatabe, former deputy governor of the Bank of Japan (BOJ) and a current member of a key government economic panel, has urged the central bank to anchor medium- and long-term inflation expectations around 2%.
His remarks came during a panel meeting on December 25, the minutes of which were released on Tuesday.
Wakatabe said inflation is expected to moderate as cost-push pressures ease, potentially allowing real wages to turn positive in 2026. “If all goes smoothly, Japan’s output gap will improve and the economy will start showing some bright signs,” he said.
Highlighting risks unique to an era of inflation, including rising interest rates, Wakatabe stressed the importance of maintaining market confidence in Japan’s finances.
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He also suggested the government should focus on reducing the debt-to-GDP ratio over time while not ignoring its primary balance target, a shift from a prior proposal to replace the target entirely.
Japanese government bond yields have been climbing, driven by investor concerns over Prime Minister Sanae Takaichi’s expansionary fiscal policies and expectations of continued BOJ rate hikes. Food prices remaining above 2% for nearly four years have further pressured the central bank.
The BOJ raised its short-term policy rate to a 30-year high of 0.75% at its December 18–19 meeting, signalling a step toward phasing out massive stimulus. Governor Kazuo Ueda has emphasised that borrowing costs may rise further if economic and price developments align with forecasts.
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The central bank monitors long-term inflation expectations using various indicators, including a December corporate survey showing firms anticipate inflation averaging 2.4% over one, three, and five years. The BOJ’s next policy meeting is scheduled for January 22–23, when markets will closely watch its updated growth and price forecasts for hints on the pace of future rate hikes.
Esther Ososanya is an investigative journalist with Pinnacle Daily, reporting across health, business, environment, metro, Fct and crime. Known for her bold, empathetic storytelling, she uncovers hidden truths, challenges broken systems, and gives voice to overlooked Nigerians. Her work drives national conversations and demands accountability one powerful story at a time.
